Traditional communications and information services and technology companies continue to experience strong growth increases in underlying demand, as M&A activity and rapid organic growth continue to drive the need for capital in the industry, according to Tom Westdyk, managing director of CIT Communications, Media and Entertainment.

Westdyk discusses current trends and financing opportunities in the communications and information services and technology sectors in Communications & Technology Financing Outlook, the latest in a series of in-depth executive Q&As featured in CIT’s Executive Spotlight series.

“These businesses are well suited for leveraged loans, as their revenue models, which are highly recurring in nature, are typically supported by licenses, subscriptions, contracts, high-quality/diverse customer bases and high customer retention rates. Additionally, cash-flow margins are high due to scalability of these businesses that creates significant operating leverage,” he said.

Positive Growth Trends

A wide spectrum of these sectors are experiencing positive industry trends, according to Westdyk. “In communications, the catalyst of this growth is sourced from both consumers and corporations that are accepting and integrating more and more new devices into their personal lives and business operations. In the information services and technology sectors, we see traditional communications and media industries continue to migrate toward digital distribution channels and technology enabled services.”

Steady Growth Through Economic Turbulence

Continued fluctuations in the economy have not had an adverse effect on these industries. Westdyk added: “Many of the applications and services provided by the communications and information services sectors drive efficiency. As such, companies are willing to purchase these technologies and services because they introduce sustained operational improvements that increase profitability long-term.”

Lenders Keen on Sector

Due in part to high cash flow margins, many lenders find these sectors attractive, Westdyk commented. “These businesses are well suited for leveraged loans, as their revenue models, which are highly recurring in nature, are typically supported by licenses, subscriptions, contracts, high-quality/diverse customer bases and high customer retention rates. Additionally, cash-flow margins are high due to scalability of these businesses that creates significant operating leverage.”

To read the full Communications & Technology Financing Outlook, click here.